Where Retail Is Going Now

A report just released by JWT Intelligence and presented for the first time at the WWD Digital Forum in New York is a thorough and in-depth look at where the business of retail is going. For most of the history of retail, society has watched stores and brands adapt to whatever changes have happened in the market, their customer base or general culture. Historically, you could see what changes were happening in retail by going into big stores. I keep being surprised that the drastic changes that have come upon retailers in the last several years have major retailers stymied. Now change in retail is harder to see because it’s only apparent in the nimble, newer, smaller competitors. Those companies have developed businesses in niche markets where the larger players aren’t as active. The JWT report is a great overview of what’s trending and what’s yet to come that isn’t apparent to the average consumer.

The report says that it’s not enough just to think about selling products electronically. “The future of retail is becoming less about screens and even less about buttons.” It’s more about using technology to sell the right products in the right way, “It’s one of total immersion, intuitiveness and invisibility…total disintermediation from every previous traditional route to consumer.” It’s a very different age we’re now in. Selling electronically and selling in stores are coming together as one to create the most effective channel to consumers.

Digital home assistant usesCourtesy JWT Intelligence

Voice-Based Commerce

There are new technologies that will be applicable to retail of every type. The JWT reports points out that “this is a new era of spoken commerce, where…commerce can happen everywhere.” That’s a little bit of hyperbole but not excessively so, you can see in the chart below that among 18-34 year olds in the US, 68% have a Google Home, Amazon Echo, or Apple iPhone that responds to voice commands. In China, it’s even higher, 80%. In an amazingly short time, voice technology has taken hold. It’s a natural way to communicate and people have taken to it quickly.

Digital home assistant ownershipCourtesy JWT Intelligence

According to the research firm Gartner, the share of mobile search queries initiated through virtual personal assistants, such as Siri (Apple), Allo (Google), Cortana (Microsoft) and Alexa (Amazon), will rise to 50% by the end of 2017. Gartner also predicts that by the end of 2017, room-based screenless devices, including Amazon Echo and Google Home, will be in over 10 million homes, and will account for a growing share of commercial traffic.

Selling via audio is not a panacea either. JWT asks, “How do you market and brand yourself over audio channels where you can’t be seen and cannot market in the same way?” It’s not like radio where you communicate with thousands or millions at one time, the product and the consumer have to find each other in a channel that’s one-to-one. Brands have to have something special to get consumers’ attention.

Experiences Consumers Want Now

Of course consumers who want experiences are a key point of study in the report. “Experience culture has come so far that it’s increasingly becoming the key driver in consumer spending, making the store experience more important than ever,” the report says. “This new era is one without cash registers, prices, staff or postal addresses. It’s one which is, or soon will be, anticipatory, cognitive, hyper-personalized and diagnostic.” What that refers to of course is artificial intelligence, using software to anticipate people’s needs, sometimes before the people are even aware of them. The idea is to use technology to make every store experience easy and convenient, two of the most important values to consumers now. “It’s a testing time for retail. Pressures on established players in the industry include a move among consumers to prioritize spending on experiences over things—Harris Poll and Eventbrite reported as early as 2014 that 72% of millennials prioritize spending on experiences over material products,” the report says.

There are a number of new kinds of experiences that relate to retail because they are great venues for selling products. They are gatherings of like-minded people, that are appealing to consumers. These include consumer summits like Airbnb Open, In Goop Health, We Work Summer Camp and Beautycon festivals. They are ticketed events that combine entertainment with mentorship, entrepreneurship training, community-building, panels, shopping and more. Then there’s foodie festivals like the four-day London Coffee Festival with music that would be appropriate at a conventional music-only festival. There’s fitness festivals like Virgin Fitness whose CEO calls them, “hard-earned fun.” There are brand “temples,” retail experiences that highlight one brand. Examples include The Spotted Cheetah, a temporary, pop-up restaurant in New York this past summer where every item on the restaurant menu was made with Frito-Lay branded Cheetos. Every table at every meal was booked before the restaurant ever opened. LG Electronics created a dishwasher-themed water park in New York last summer to promote the launch of a new dishwasher product.

Many events are focused on entrepreneurship among millennials. Many others are appealing because they demonstrate thought leadership and innovation which attracts consumers as learning becomes a lifelong activity. Influencers are also important but not celebrities as much as in the past. What’s gaining in popularity is leadership in technology, business, authorship and other entrepreneurial activities.

Augmented Reality

Augmented Reality (AR) will have a big role to play at retail. It’s important when talking about AR to remember that most of the new uses of AR haven’t been proven out. But there have been a number of huge hits that imply the technology can be important. You’d have to be just visiting our planet not to know what Pokemon Go was. Another great example is Modiface, although you probably don’t know that name. They’re the company behind the app at Sephora and other beauty stores that let you see eye makeup or lipstick on your face when it’s only there electronically. You select what product you want and look in the mirror and there you are with the lipstick or other makeup in the right place on your face so you know exactly what it will look like on you when you buy it.

America's great pasttime, major league baseball, isn't far behind either. In 2018, they will likely unveil technology that will let you sit in the stands at a baseball game and when you hold up your phone to the field, you'll see information about the players and stats about the game.

AR is going to expand and be available for all kinds of products. Retail analyst George Wallace, chief executive officer of MHE Retail, says, “if you can really see what that dress looks like on you, or what that furniture’s going to look like in your living room, or what those curtains are going to look like in your bedroom, I see that as something people would invest in.”

Challenges

Aside from the challenges that any successful business has, retail has a challenge that’s bigger than almost any other: to succeed you have to go through or around Amazon.com. The JWT report says, “According to research published by global e-commerce consultancy Salmon in July 2017, 37% of all online global spending is done through Amazon. The same research also found that 53% of the consumers surveyed said they are more likely to buy from Amazon Prime than a retailer’s online store.” Significantly, it’s not just that Amazon winds up with the sale, consumers start there as a matter of habit. According to JWT, “89% of US millennials check Amazon first … each time they make an online purchase.” You either sell something they don’t sell or you beat them on price or service or you lose to them; they’re hard to beat. Hugh Fletcher, Global Head of Consultancy and Innovation at Salmon, said, “put simply, they fulfill their customers’ expectations better.”

Walmart is not making it easy for competitors either. They are using their scale to fight back against Amazon. Last month they announced a partnership with Google in voice shopping using the Google Assistant. Marc Lore, president and chief executive officer of Walmart eCommerce US, told WWD, “This is just the beginning. Next year, we’ll leverage our 4,700 US stores and fulfillment network to create customer experiences that don’t exist within voice shopping anywhere else, including choosing to pick up an order in-store, often for a discount, or using voice shopping to purchase fresh groceries.”

The technology will also get tougher to beat. Hyper-personalization, making every sale both in-store and online, a unique experience for every consumer in a way that relates to their needs, will become ever more important every day. That level of personalization will be more easily accomplished as artificial intelligence technology develops. There will be more AI everywhere as it works its way into retailers’ strategies.

The important thing to remember is that even as the future of what retail will look like begins to form, no one has the answer yet. Even the giants who are investing and making major acquisitions, are going forward without knowing what they’re doing will work. The key is experimentation, iterating to find what works best and what should be tossed away. It’s going to be very expensive, a lot of money will be lost. But a lot will be made by the winners who find the right formulas.

I have been doing mergers and acquisitions for over 35 years and I specialize in the apparel, retail and consumer sectors. I am a co-founder and partner at Triangle Capital LLC. Before Triangle Capital, I was Managing Director at a boutique called Financo where I handled mos...